Victor Hwang '96 on "The New Economics of Innovation Ecosystems"

A new strain of economic thought is emerging to explain how societies can grow sustainably. It’s not just coming from the public, which has already expressed discontent with the status quo through demonstrations worldwide. And it’s not just coming from business leaders, such as Richard Branson, who co-founded a group called the B Team to reset the values of corporate management. In their own quiet way, academic researchers in the field of innovation have also engaged this issue.

Today we can see the early outlines of a new economic model. Based on our work studying the dynamics of innovative communities like Silicon Valley, we have discovered certain themes common across several disciplines. As is usually the case, many of these ideas come from non-economic fields, such as biology, psychology, sociology, design, business, and law. Their discoveries point to an emerging framework. It is one that recognizes the full range of human interaction as a tool to explain how innovation ecosystems flourish.

This topic matters a lot. Global economies are grasping for new ways to operate more inclusively, create jobs, raise productivity, and elevate standards of living. But why do certain communities like Silicon Valley generate so much wealth continually over time, while other places—even those with talented people, capital resources, valuable assets, and free markets—languish? If already a society’s laws are enforced, markets are free, roads are paved, and people are educated, then what else could these communities possibly do? What economic levers are left to pull? These are riddles that many leaders, both in America’s heartland and emerging world capitals, are struggling to answer.